Lean accounting. An SME manufacturing lifeline?

Manufacturing SME’s in this country (Australia) are under severe pressure, particularly in heavily trade exposed industries like food manufacturing.

Yesterday, Windsor Farms  was put into administration, a month ago, Rosella went the same way and is currently being liquidated in a fire sale, Heinz ceased to manufacture here a year ago, Goodman Fielder is a shadow of its former self, the list goes on.

To some extent, most of the failed, and failing businesses have adopted some of the elements of “Lean” often just seeing it as a way to cut costs, rather than recognising the wider implications for enterprise culture.

However, almost always, the accounting function is the last to make any substantive changes. Partly this is due to the conservative nature of the profession and its training, and partly the fault is accounting convention and regulation. 

To survive, SME’s need to remove waste in all its forms. The stuff on the factory floor is easy to see, what is harder  to see is the waste in time, effort, and morale that occurs in offices. The core service function in any enterprise is accounting,  so change here can have substantial impact elsewhere. It is my view that setting about changing the focus of the accounting function from compliance and the traditional view of the published accounts to one focused on waste in all its forms, can pay huge dividends.

There are some great resources around, even though the thinking is still emerging. The take-up is remarkably slow given the dire circumstances of much of the manufacturing sector, so there is the scent of competitive advantage as well as just survival in the air.

This interview with Lean guru Bill Waddell is a terrific explanation, Brian Maskell has a range of material available free on his great site that offers some real thought starters. A recent blog post by Brian also led to this front page piece in “Strategic Finance” magazine, finally the profession starting to recognise the implications of lean accounting.

 

PS. March 13, 2013. Another established SME, Spring Gully, a 70year old family company goes to the wall. There is simply nothing left in the fabric of food manufacturing in this country, and in the long run, we will pay a very high price for that generational mismanagement of a pretty fundamental manufacturing sector. 

About strategyaudit

StrategyAudit is a boutique strategy and marketing consultancy concentrating on the challenges of the medium sized manufacturing businesses that make up the backbone of our economy. The particular focus is on their strategic and marketing development. as well as the business and operational efficiency improvements necessary for day to day commercial survival. We not only give advice, we go down "into the weeds" to ensure and enable implementation.
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